One thing's for sure: The management at Cemex
Rinker, an Australian cement and aggregate company whose shares had been crushed in the preceding months, deemed Cemex's offer opportunistic and spurned it. I saw nothing wrong with the opportunism from Cemex -- it's a quality I appreciate -- but the market always has a vote and quickly sent Rinker's shares well above Cemex's buyout offer to $71 per ADR.
Both companies issued some press releases in the two months after the initial offer, debating the merits of an integration and the valuation of Rinker. Rinker, via a third-party valuation, argued it was worth at least $15.85 to $17.74 a share. It's worth noting that Rinker paid for this valuation to be done, which puts an undeniable bias into the work.
But biases and everything else go out the window, because Rinker has succumbed to a new offer from Cemex. It might be that Rinker's reliance on Florida and the growing cracks in the housing market persuaded Rinker to stop playing hard to get. The new offer is a 22% increase from Cemex's original offer, but falls shy of Rinker's third-party assessment. So far, both boards have approved this offer, and Cemex considers it the final offer unless another suitor pipes up.
The pairing of Motley Fool Stock Advisor pick Cemex and Rinker creates a titan in the cement and building-materials space. The combined company would have a very strong position in the U.S., particularly in areas that should continue long-term development, such as Arizona and Florida. From a product-mix perspective, the aggregate reserves (reserves of sand plus gravel) that Rinker brings to the table are valuable, and the combined company would be the largest seller of aggregates in the world.
Cemex is a machine when it comes to managing its operations and integrating acquisitions. Rinker is a very big bite for the company, but given Cemex's success with large acquisitions in 2000 and 2005, competitors such as Lafarge
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At the time of publication, Nathan Parmelee had no financial interest in any of the companies mentioned. Cemex is a Motley Fool Stock Advisor selection. The Motley Fool has an ironclad disclosure policy.
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